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W Reproduced from the Unclassified I Declassified Holdings of the National Archives d e c l a s s if ie d Authority E .6 . 1235k M orftn iiT of meeting of the Open Market Investment Committee rm rtT i fo r the Federal Reserve System in Washington on July 27, 1927iOt tf A“ , Ai The meeting was called as a meeting of the Open Market Investment Committee with the.Federal Reserve Boax^and representatives of two of the mid-western banks were ‘MriT'* * n* i * The credit 1M * *S policy of the System was fu lly discussed. A, Consideration was given to the continued f a l l in commodity prices, to the fa ct that there was a diminution of borrowing from the reserve banks at ft b b m t to ^ some slackening in business, and e s p e c i a l l y to the relation of money rates in the United States to ^ ^ > money rates in Europe. I t was reported that because of heavy foreign LulZ L A**+1M jaaua.X f y paymentsAthere was a continued drain on European central bank gold reserves, which made i t more than lik ely that central bank rates in Europe would need to be further advanced this f a l l . The German and Austrian rates have already been once advanced and there is som e probability of a one per cent advance in the rate of the Bank o f England• A ll present at the meeting recognized that these developments Reproduced from the Unclassified I Declassified Holdings of the National Archives d e c l a s s if ie d Authority E .6 . U^Sfe -2 - w ou ld n e c e s s a r i l y have a d e p r e s s in g e f f e c t upon b u s in e s s a b roa d and m ight ten d t o r e s t r i c t th e fre e d o m o f p u rch a ses o f vo/3 m Wpfcatt -c in b. fe t h i s c o u n tr y a t th e u s u a l s e a s o n . I t was a l s o b ro u g h t o u t t h a t i t i s th e d u ty o f th e c e n t r a l banks t o keep money r a t e s a t as low a l e v e l as may b e a t t a i n e d w ith s a f e t y , and th a t a t t h i s tim e r a t e s c o u ld be red u ced n o t o n ly w it h o u t h a m b u t w it h r e a s o n a b le e x p e c t a t io n s o f b e n e fic ia l r e s u lts . I t was f e l t t h a t th e o n ly p o s s i b l e a d v e r s e d evelopm en t r e s u l t i n g from a g e n e r a l lo w e rin g o f d is c o u n t r a t e s w ould be in th e s p e c u la t iv e s e c u r i t y m a rk e ts, but th a t t h i s p o s s i b i l i t y sh ou ld n o t sta n d in t h e way o f t h e e x e c u t io n o f an o t h e r w is e d e s i r a b le p o lic y . There was no e x c e p t io n t o t h e v ie w th a t t h e tim e had a r r i v e d , o r was a p p r o a c h in g , when th e d is c o u n t r a t e in New Y ork sh ou ld b e r e d u c e d , and w ith one o r two e x c e p t io n s t h e r e was no d i s s e n t from th e v ie w t h a t a System p o l i c y o f low er d is c o u n t r a t e s sh ou ld in g e n e r a l p r e v a i l . It was p o in t e d o u t , h ow ev er, th a t l o c a l c o n d it io n s i n some o f th e i n t e r i o r eLfrr\cir>\cIL r e s e r v e d i s t r i c t s d id n o t in d i c a t e any -Heed f o r r a t e red u ction s^ i n t h o s e t . M JtorajUL d i s t r i c t s and th a t A w m* /> an fL su p p ly o f c r e d i t f o r a l l needs a t -w Reproduced from the Unclassified I Declassified Holdings of the National Archives DECLASSIFIED Authority E .6 . UZSIo -3 - th© p r e s e n t r a te s * O f f i c e r s o f some o f t h e l a r g e r member banks w ere q u o ted a s op p osed t o r a t e r e d u c tio n s * On th e o t h e r hand, i t was p o in t e d o u t t h a t r e d u c t io n s now , w hich w ould r e s u l t in no harm and c o n s id e r a b le p o s s i b l e b e n e f i t , w ou ld p la c e th e r e s e r v e banks in p o s i t i o n t o make i n c r e a s e s l a t e r w h ich m ight s e r v e as w arn in gs w ith o u t p e n a l i z i n g b u s in e s s w ith h ig h r a te s # I t was a l s o s u g g e s te d th a t in d is c o u n t r a t e a t h r e e and o n e - h a l f p e r c e n t A. w>o nofr e f f e c t i v e kti l>ringing, "aUuut - gw y T gttirpt i w l a r * LhC'-g un u m 1 l e tT "q#< iwho>i at» Bl some f u r t h e r p u rch a ses o f s e c u r i t i e s m ight be d e s i r a b le up t o sa y $ 5 0 ,0 0 0 ,0 0 0 * The m ost im p orta n t c o n s i d e r a t i o n a t th e m eetin g was u n d o u b te d ly th e f a c t th a t th e d i f f e r e n t i a l betw een th e r a t e s i n New Y ork and th e r a t e s i n London i£#*e n o t to d a y s u f f i c i e n t t o e n a b le L ondon, and ? . t h e r e f o r e th e r e s t o f E u rope, t o e^ w rpe g e n e r a l a dvan ces in r a t e s u n le s s r a t e s h ere w ere lo w e r e d , and th a t th e con seq u en ce o f such h ig h r a t e s as w ould r e s u l t in Europe w ould b e u n fa v o r a b le t o th e m a rk etin g o f our e x p o r t p rod u ce a broad and w ou ld have an a d v e r s e e f f e c t g e n e r a lly on w o r ld tra d e *